Mba 635 final project csr addendum

MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum

MBA 635: Ethics, Corporate Culture, and Social Responsibility

Final Project: Nationstar Mortgage Holdings, Inc.

Corporate Social Responsibility (CSR) Addendum

By: Kelly A. Giambra

Southern New Hampshire University

Module 9 January 2, 2017

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Section I. Background Information

Nationstar Mortgage Holdings, Inc.: Company Description

Nationstar Mortgage Holding, Inc. (NYSE: NSM) is a leading non-bank mortgage

servicer that provides servicing, loan originations, and transaction based services mainly to

single-family residences within in the United States (Nationstar Mortgage, 2016). The Company

was founded in 1994 with headquarters in Lewisville, Texas and is a subsidiary of Fortress

Investment Group, LLC. Nationstar operates within three mortgage market segments: servicing,

originations, and Xome real estate services (Nationstar Mortgage, 2016). The Nationstar

servicing segment offers residential mortgage services such as payment processing, collection of

insurance, response to borrower inquiries, loss mitigation, loan modifications, foreclosures and

property disposition on behalf of investors, and escrow account and loan administration

(Nationstar Mortgage 2016). The originations segment offers various types of residential loan

products under the Greenlight Financial Services and Nationstar Mortgage brands (Nationstar

Mortgage, 2016). The Xome real estate segment provides online residential home-buying and

selling services using technology aimed to enhance the residential and transaction experience for

both consumers and real estate professionals (Nationstar Mortgage, 2016).

Nationstar Mortgage Holdings, Inc.: Target Stakeholders

The Nationstar target stakeholders include team members, customers, shareholders,

business organizations, suppliers, non-profit organizations and advocacy groups (Nationstar

Mortgage, 2016). Nationstar team members consist of over 7,400 employees and a leadership

team of ten executive vice presidents (VPs), along with five members whom serve on the board

of directors (Nationstar Mortgage, 2016). The Company Chairman and CEO is Jay Bray who

was first appointed to the Nationstar board in 2012 and became Chairman in July 2016

(Nationstar Mortgage, 2016). Nationstar team members serve approximately 2.7 million

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customers from across the U.S. (Nationstar Mortgage, 2016). The customer base consists of

several members of the real estate market: homeowners, homebuyers, home sellers, investors,

and realtors (Nationstar Mortgage, 2016). The shareholders whom own Nationstar shares and

may consist of customers, employees, businesses, and individual members of the broader public.

Nationstar’s primary investors consist of Government Sponsored Entities (GSEs) like Fannie

Mae and Freddie Mac, private label investors, Ginnie Mae, investors in mortgage servicing rights

(MSRs), and clients who hire them to subservice their accounts (Nationstar Mortgage, 2016).

Nationstar also takes an active role in business organizations that share common interests

related to the mortgage industry. These relationships are helpful in establishing an understanding

of stakeholder expectations, best practices, and may enhance learning from other leading

companies in the business. Some examples of these organizations may include the Mortgage

Bankers Association (MBA), U.S. Green Building Council, The Clearing House, state mortgage

associations, the Center for Financial Services Innovation, and Financial Services Roundtable.

In addition, the Company actively engages in public policy advocacy in various government

organizations on a wide array of issues impacting the mortgage industry (Nationstar Mortgage,

2016).

Nationstar engages with thousands of global suppliers that provide various goods and

services needed to adequately and efficiently run their business (Nationstar Mortgage, 2015).

These stakeholder relationships are important in enhancing the quality and value of products and

services offered to Nationstar customers. In addition, Nationstar regularly engages with

community leaders and advocacy groups at the local and global level as a part of their CSR

efforts (Nationstar Mortgage, 2015). These interactions are important for maintaining

relationships in various markets to identify opportunities to help serve communities in which

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Nationstar does business. Collaboration with advocacy groups on issues related to housing and

the mortgage industry is important in establishing strategic relationships, where resources and

expertise are shared to reach common mutual goals.

Relationship of the Target Stakeholders to the Nationstar Mission, Vision, and Values

It is the mission of Nationstar is to: “deliver services in a manner which ultimately better

serves and empowers customers so that customers are created for life” (About Nationstar, 2016).

Nationstar is customer-centric, experienced, and growing, with future goals of innovation and

becoming the leader in quality customer service in the U.S. non-bank mortgage servicing

industry (About Nationstar, 2016). Nationstar has been dedicated to providing exceptional

customer service since 1997 and continues to make improvements that supersede the industry’s

competition. As a non-bank mortgage servicer, the Company innovated its growth when new

opportunities became available as many large banks exited the servicing industry in recent years.

As a result, Nationstar introduced additional brands alongside its original name: Greenlight

Loans, Xome Real Estate, and HomeSearch.com (Nationstar Mortgage, 2016).

Developing lifelong relationships with target stakeholders is fundamental to Nationstar’s

ability to identify and deliver solutions to social, economic, and environmental issues and to help

strengthen the communities in which Nationstar operates. As a result, Nationstar invites its

stakeholders to help them understand their perspectives so they can better serve their customers

and communities. The Company encourages feedback from stakeholders and aims to be

transparent about progress made and any challenges in its CSR efforts. Collaborating with

stakeholders is essential to long-term success and effective strategic relationships with the

community, government, and advocacy groups and other stakeholders in order to meet the needs

of Nationstar customers and communities to help strengthen the economy.

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Section II. Trends

A. Nationstar Mortgage Holdings, Inc.: Analysis of Current Internal and External

Factors Impacting the Mortgage Business Environment

The business environment of Nationstar may be impacted by several current internal and

external factors. Internal factors may consist of financial performance, organizational direction,

and employee culture and company morale, while external factors may consist of economic

growth, aggregate demand for U.S. mortgages, volatility in interest rates, and complex mortgage

regulations.

Internal Factor: Financial Performance

The financial performance of Nationstar is a key internal factor currently impacting their

business environment. According to third quarter 2016 earnings results, financial performance

appears to be positive (Nationstar Mortgage, 2016). Nationstar has positioned itself to grow their

mortgage servicing portfolio to over 450 billion by year-end 2016, which will mostly be driven

by new partnerships with Seneca Mortgage Servicing and USAA (Business Wire, 2016). During

the third quarter, the Company earned net income of 51 million, boarded over 510 thousand new

customers to their servicing segment, funded over 25 thousand mortgages, and developed new

technologies to improve the mortgage experience for their 2.7 plus million customers (Business

Wire, 2016).

Internal Factor: Organizational Direction

The role of Nationstar’s leadership in its organizational direction is an important internal

business factor that impacts the Company’s business environment. One of the critical issues with

Nationstar leadership is the lack of women and ethnic diversity in executive roles. Currently, the

Nationstar Board of Directors consists of no less than three and no more than eleven members,

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which allows room to accommodate more women and minorities to the board. Cultural diversity

and inclusion will also bring in new thinking, insights, and perspectives about Nationstar’s

consumers, markets and business practices (Bajic, 2015). .

Internal Factor: Employee Culture and Company Morale

The employee culture and Company morale of Nationstar employees is an internal factor

that will be important for future growth of the business. Nationstar company culture is centered

on working hard and playing hard, while going the extra mile to help customers find solutions to

their unique needs (Nationstar Mortgage, 2016). However, Nationstar employee reviews on

culture have been recently reported as being poor to average (Glassdoor, 2016). Nationstar

employees also rated the Company three out of five stars when it comes to culture and values,

work-life balance, benefits, and career opportunities (Glassdoor, 2016). This is a sign that the

Company will need to make improvements in order to minimize turnover which may impact the

Nationstar mission of providing quality service to customers.

External Factor: Future Economic Growth

A key external factor affecting both Nationstar and the U.S. mortgage industry is the

future growth of the economy. According to Freddie Mac, current 2016 growth improved with

low unemployment rates and higher wages (Freddie Mac, 2016). However, the Federal Reserve

(the Fed) is likely to raise interest rates in the near future, though the global economy is expected

to worsen (Freddie Mac, 2016). Overall, the U.S. economy made modest gains in 2016, with

growth trending upward for 2017, and GDP increasing as a result of high levels of consumer

spending (Freddie Mac, 2016). Furthermore, inflation remains under 2 percent, though energy

prices are forecasted to push inflation rates to above 2 percent in 2017 (Freddie Mac, 2016) The

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job market is currently at a slowdown while employment and unemployment rates are expected

to decline to about 4.7 percent ending in 2017 (Freddie Mac, 2016).

External Factor: Aggregate Demand for U.S. Mortgages

The aggregate demand for mortgages in the U.S. is a main driver for Nationstar’s loan

production and mortgage servicing segments. Demographic trends are now showing an increase

in demand for homeownership especially amongst minority households, millennials, and the

aging baby boomer generation (Evidence Matters, 2016). The consumer demand for mortgages

is affected by both interest rates and the strength of the U.S. housing market. In 2016, the U.S.

housing market continued to perform well and it is likely that the growth will eventually

slowdown in the near future (Freddie Mac, 2016). Demand for mortgages increased over the

past few years due to the historically low interest rates, however, refinancing activity is

beginning to decline and may persist into 2017 as the market shifts more towards home

purchases (Freddie Mac, 2016).

External Factor: Volatility in Interest Rates

Volatility in interest rates may have a significant impact on Nationstar’s business

environment, which includes its loan originations volume, mortgage servicing segments, and the

estimated value of their mortgage servicing rights (MSRs). Though mortgage rates have been

forecasted to remain low, the likelihood of rates increasing will depend on the global economy

and the performance of worldwide bond yields. In addition, the 2017 forecast has predicted a

gradual rise in interest rates with the average rate for a 30 year fixed mortgage expected to

increase to 3.9 percent by the end of the fourth quarter of 2017 (Freddie Mac, 2016). Rising

interest rates may reduce the number of Nationstar’s loan originations, while low interest rates

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may cause a write-down in the value of MSRs, which must be offset by increasing loan

originations to prevent a reduction in net income (Nationstar Mortgage, 2016).

External Factor: Complex Mortgage Regulations

Nationstar’s business environment operates in a highly regulated industry subject to

federal, state, and local regulations, which can significantly impact financial performance. These

laws and regulations affect the way Nationstar does business and can restrict certain types of

product offerings or business expansion opportunities. For instance, the Consumer Financial

Protection Bureau (CFPB) adopted new disclosure rules required under the Truth in Lending Act

and Real Estate Settlement Procedures Act (TILA-RESPA). These rules require investments in

new mortgage production processes and compliance systems. In addition, expansion of the state

Attorney General authority under the Dodd Frank Wall Street Reform Act and Consumer

Protection Act of 2010, can place Nationstar at risk of more state lawsuits, thus increasing legal

and compliance costs.

B. Nationstar Mortgage Holdings, Inc.: Description of Trends in

Corporate Social Responsibility (CSR), Sustainability, and Business Ethics

The 2007-2008 U.S. subprime lending and financial crisis brought about significant

consequences for both the economy and society in which the mortgage industry continues to

recover from. Prior to the subprime lending crisis, the absence of CSR in U.S. mortgage lending

practices caused many lenders to irresponsibly approve mortgages without considering borrower

affordability. Consequently, new movements have now emerged involving Corporate Social

Responsibility (CSR) efforts in helping to prevent another crisis from occurring. As Nationstar

looks ahead, there will be a number of trends in CSR, sustainability, and business ethics that

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could potentially impact the business; several of which will relate to environmental, social and

economic concerns.

Continued Trends in Responsible Mortgage Lending

Continued trends in responsible lending in relation to CSR efforts are likely to continue

in the future of the mortgage industry. Responsible lending practices may involve taking the

extra steps needed to consider whether a customer has the ability to repay, while also offering

assistance to homeowners who face foreclosure. In addition, lenders will continue to extend

credit to the underserved as well as adjust loan approval standards to offer more programs to

borrowers with low credit scores (The News Desk, 2016). Responsible lending practices are

especially important to today’s millennial consumers whom have learned from the previous

economic downturn to make better financial choices (Frost, 2016). Millennial consumers are

additionally seeking out “green” homes that are energy efficient and are making improvements

to their existing residences that reduce energy costs (Frost, 2016).

Mortgage Lenders Will Increase Their Focus on Sustainability

Current trends in CSR have shown that mortgage lenders are increasing their focus on

sustainability metrics. This is primarily due to investors becoming more dependent on an array

of sustainability issues when making informed decisions on investments (Finkelstein, 2016).

Most of these issues surround minimizing risk of financial loss and looking at the shifting

demands of today’s borrowers in the changing marketplace. Most specifically with risk

reduction, CSR activities will consist of continued trends in foreclosure prevention. Despite

recovery from the subprime crisis, there are still over one million borrowers or 2.6 percent of all

mortgages seriously delinquent on payments (Finklestein, 2016). Though the aggregate number

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of seriously delinquent mortgages and foreclosures have declined since 2007, there is still a need

to continue implementation of sustainable lending practices (Finklestein, 2016).

Increased Investments in Technology

Increased investments in technology in CSR activities will continue in upcoming years as

lenders attempt to provide customers with more choices and financial resources (Hoyles, 2016).

Alongside this trend, there will be more investments in data protection and other technology that

protects consumer privacy and information security (Hoyles, 2016). The mortgage industry has

gone through rapidly changing technologies over recent years, and any disruption in computer

systems from fire, power loss, telecommunications, cyber-attacks, computer viruses, and natural

disasters can adversely impact Nationstar’s business. Nationstar will need to take extra steps to

prevent these events which could lead to violations in privacy laws, financial loss to customers,

loss of customer confidence, customer dissatisfaction, and harm to Nationstar’s reputation

(Nationstar Mortgage, 2015).

C. Nationstar Mortgage Holdings, Inc.: Impact of Trends and Preparing for Impact

Nationstar may prepare for impact of future trends in CSR by leveraging their existing

mortgage loan servicing platform to enter into better programs and services for homeowners. By

year end 2016, Nationstar will seek to reduce costs in mortgage production and servicing to

better align resources and expenses with the upcoming mortgage origination volume (Nationstar

Mortgage, 2015). As a mortgage lender with a critical role in the housing market, Nationstar

must take moral responsibility in its mortgage product offerings and put forth efforts to protect

their consumers from harm. In addition, Nationstar must be held to highest standards of CSR

and avoid offering products that are likely to harm the environment and local communities

(Frost, 2016). There are several new and amended rules and regulations that promote fair

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lending and consumer protection, which have eliminated many of the risky loans offered during

the mortgage boom. Therefore, with Nationstar’s goal of making financial lives better, extra

efforts should be taken to protect consumers and ensure compliance.

Section III. Ethics

A. Nationstar Mortgage Holdings, Inc.: Ethical and Regulatory Issues

That Could Impact Business

Ethics and regulatory issues play a significant role in Nationstar’s mortgage lending

practices and overall business environment. The unethical behavior that occurred during the

subprime crisis had been named partly responsible for the financial crisis in conjunction with

poor regulations and lack of borrower insight at the time. One significant unethical practice

during the subprime lending crisis involved predatory lending. Predatory lending is a practice

which engages in unfair and abusive loan terms, or convinces a borrower to accept a loan that

may be unfair in terms thus exploiting, coercing, or deceiving a borrower (Debt.org, 2016).

Predatory lending also benefits the lender while disregarding the borrower’s ability to repay a

mortgage or understand its terms (Debt.org). These practices were damaging to stakeholders,

which caused regulators to intervene through passage of laws like the Ability to Repay Rule that

requires for borrowers to provide documentation showing ability to repay (Bankers Edge, 2016).

New industry regulations have additionally been designed to increase transparency and

regulatory reporting of mortgage lenders. This includes legislation passed to restrict predatory

and deceptive lending practices, as well as promote fair lending among industry players. Federal

and state mortgage laws have been put in place to ensure that professionals are engaging fairly

with consumers throughout the entire loan process. In addition, certain lending practices are

prohibited by federal and state law in order to promote ethical lending. For instance, in recent

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years the federal government made revisions to existing laws under the Real Estate Settlement

Procedures Act (RESPA), the Truth-in Lending Act (TILA), the Gramm-Leach Bliley Act

(GLBA), the Equal Credit Opportunity Act (ECOA), and the Fair Housing Act (Bankers Edge,

2016).

Mortgage fraud is an additional ethical and regulatory issue that costs the mortgage

industry billions of dollars each year as well as threatens the entire mortgage market. Mortgage

fraud is one of the fastest growing white collar crimes in the U.S., and in recent years received

attention from the FBI, the Internal Revenue Service (IRS), HUD, and federal and state

regulators (Bankers Edge, 2016). Therefore, the ethical behavior of Nationstar as well as their

third party service providers, consumers, real estate brokers, loan officers, and loan processors

must be considered through the entire process for the borrower and the overall operations of the

business.

B. Alignment of Nationstar’s Corporate Strategy, Brand Development, and

Decision-Making Processes to Business Ethics and Regulatory Issues

Alignment of Nationstar’s corporate strategies, brand development, and decision making

process to ethics and regulatory issues should include social causes, methods of intervention, and

partnerships that fit with their existing business and resources underlying the Company’s success

(Roth, 2014). A primary strategy for this will involve building an ethical rebrand to align with

the Company’s mission and values. The Nationstar brand is “a promise delivered” and ethical

initiatives should deliver this promise by serving as a growth foundation for the customer,

products, and services (Roth, 2014). The brand name for Nationstar’s servicing and loan

originations will soon be changed to “Mr. Cooper”, but the legal name and stock ticker will

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remain Nationstar (Nationstar Mortgage, 2015). The brand name shows that Nationstar plans to

align the entire Company around customer advocacy and creating a strong ethical foundation.

Nationstar should also continue to use philanthropy in its public relations and

advertisements to promote the Company brand. Philanthropic investments have a powerful

impact on ethics, competitiveness, financial performance, and cost effectiveness (Porter &

Kramer, 2002). Nationstar already uses current resources to form partnerships with nonprofit

organizations and to collaborate efforts for the benefit of society (Porter & Kramer, 2002). Two

methods of achieving this are through the Company’s Random Acts of Kindness Project and

continuing participation with Habitat for Humanity. These initiatives create more personalized

relationships with Nationstar consumers while also safeguarding their best interests (Nationstar

Mortgage, 2015).

C. Sustainability of Nationstar’s Corporate Strategy, Brand Development, and Decision-

Making Processes in Response to Business Ethics and Regulatory Issues

Sustainability of Nationstar’s corporate strategy, brand development, and decision-

making should recognize the importance of continuity in regard to providing jobs and the

Company impact on people, planet, and profits (Simply CSR, 2008). Nationstar commits a large

amount of resources toward government loan modification programs under the Home Affordable

Refinance Program (HARP), the Home Affordable Modification Program (HAMP), and the

Making Home Affordable plan (MHA). Participation in these programs not only helps to

preserve profits for shareholders, but also promotes ethical responsibilities and regulatory

compliance which helps the Nationstar customers.

Government loans are especially important for sustainability as it aims to increase the

number of new homebuyers who would not otherwise qualify for a mortgage (Russell, 2015).

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This additionally minimizes the negative impacts on the economy as government assistance

reduces the number of foreclosures in the U.S. housing market (Russell, 2015). Responsibly

expanding access to credit will help creditworthy low income borrowers and traditionally

underserved populations, thus expanding credit access sustainability (Evidence Matter, 2016).

Lastly, offering VA loans are crucial to sustainability as there have recently been a high number

of discharged U.S. soldiers looking to buy homes. With this in mind, HUD has released new

guidelines to provide protections for military members seeking to purchase their first home

(Russell, 2015).

Section IV. Decision Making

A. Nationstar Mortgage Holdings, Inc.: Decisions in Response to

Potential Ethics and Regulatory Issues

Making ethical business decisions in response to potential ethical and regulatory issues is

critical to the long term success of Nationstar. An effective strategy for this will allow

Nationstar to set standards for the mortgage servicing industry, while gaining a strong, positive

reputation in the market, and securing a loyal customer base. Therefore, Nationstar’s approach

may involve refinement of governance, business, and risk-management practices to support the

dream of homeownership for their customers and communities (Nationstar Mortgage, 2015).

Some core principles in support of this strategy will include putting customers first, valuing and

supporting team members, investing in communities, and strengthening the economy and

housing market. As a result, the following highlights and efforts should be made to promote

resiliency and sustainability within the communities that Nationstar serves:

Anti-Predatory Lending Policies and Practices

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Predatory lending practices are not clearly defined under federal law and state definitions

may vary in how they define predatory lending practices (Freddie Mac, 2016). Some general

examples may include: excessive costs, equity stripping, failure to report borrower credit

information to limit eligibility for a lower interest rate, steering into higher cost mortgages, and

credit insurance products are that financed up front (Freddie Mac, 2016). Nationstar’s position

on predatory lending will be to remain dedicated in eliminating these abusive and unfair lending

practices. As the number one servicer in the United States (U.S.), Nationstar needs to be a leader

in development and promotion of responsible lending practices. Nationstar establishes policies

restricting the origination of loans that are considered predatory, as well as works with other

responsible companies that ensure customers have access to affordable mortgage financing

(Nationstar Mortgage, 2015).

To address predatory lending issues, Nationstar must implement a set of measures that

will protect consumers such as corporate policies, targeted mortgage products, and educational

programs in communities across the U.S. (Freddie Mac, 2016). For instance, Nationstar may

implement a financial education program that helps empower consumers in understanding how

to build and maintain good credit (Freddie Mac, 2016). Nationstar may establish and strengthen

existing policies that refrain from doing business with others who engage in predatory practices

and also conduct on-site audits to ensure compliance (Freddie Mac, 2016). In addition,

Nationstar may refrain from acquiring servicing portfolios from servicers who do not report full-

file data to the credit bureaus so borrowers with good payment histories can qualify for lower

cost mortgages (Freddie Mac, 2016).

Nationstar’s rebrand to Mr. Cooper should also assist in anti-predatory lending practices

as it will offer more innovative loan products aimed at giving borrowers greater mortgage

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choices with initiatives that help borrowers avoid predatory lending. A key goal of Mr. Cooper

should be to offer products that promote responsible lending while bringing liquidity and

stability to the mortgage market. These practices will allow Nationstar to go above what is

required under federal and state predatory and deceptive lending laws. Most specifically,

Nationstar must comply with the federal Dodd-Frank Title XIV-Mortgage Reform and Anti-

Predatory Lending Act, which was passed in response to the 2008 housing bubble (Dodd Frank,

2016). Title XIV amends the Truth in Lending Act (TILA) to establish duty of care for all

mortgage companies. Subtitle B sets minimum standards for all mortgage loans and forbids

creditors from making a loan unless they can reasonably determine that a borrower has the

ability to repay (Dodd Frank, 2016). Title XIV was implemented to prohibit certain predatory

lending tactics and provide a certain level of disclosure to borrowers so they are aware of risks

associated with a mortgage (Dodd Frank, 2016).

Implementing Foreclosure Prevention Programs and Practices

Nationstar should continue to implement programs and practices that help homeowners

avoid foreclosure. Foreclosure prevention programs will be especially important with Obama’s

Make Home Affordable (MHA) program coming to an end, and the mortgage industry will need

to take on more responsibility in assisting struggling homeowners through loan modifications

and other loss mitigation programs (ABA, 2016). During the periods of April 2009 and May

2016, the MHA program successfully allowed lenders to approve 10.5 million homeowners for

loan modifications or other mortgage assistance which help them avoid foreclosure (ABA,

2016). With President Trump in office, is it unclear as to whether or not MHA or other

government programs will continue. Subsequently, Nationstar may need to improve on their

foreclosure response strategies by joining in with states, cities, suburban communities, task

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forces, and coalitions to coordinate and improve local responses to the foreclosures. Some basic

approaches may include getting organized for foreclosure response, strengthening the state and

local policy environment, and periodically assessing progress (Kingsley, Smith, & Price, 2009).

Mortgage Fraud Prevention Policies and Best Practices

As an industry player, Nationstar is responsible for the prevention, detection,

investigation, resolution, and reporting of fraud and other suspicious activity in the mortgage

industry (Nationstar Mortgage, 2016). Reliable and effective fraud prevention and detection

programs are essential to this, long with cooperation with legal authorities in investigating and

prosecution of mortgage fraud and related crimes (Freddie Mac, 2016). Therefore, Nationstar

must continue to build on existing mortgage fraud prevention programs which manage risks to

stakeholders and protect consumers from victimization. Some best practices may include

employee training and awareness programs, prudent underwriting standards, quality control

programs that help with oversight, and targeted training opportunities (Freddie Mac, 2016). In

addition, Nationstar should provide fraud prevention education to employees and consumers so

they can learn to identify common schemes and how to report suspected incidents of fraud.

Advocating and Doing what is Right for the Customer

In order to be number one in the industry, Nationstar must be the best in credit and risk

management to support their creditworthy customers when they need home financing. The

fundamental principle of sound credit is to “know your customers” and “understand their unique

needs” (Nationstar Mortgage, 2015). Nationstar should ensure that their loan originators are well

trained, knowledgeable, and use common sense when working with customers. It is important to

always consider whether the credit decision makes sense for both the borrower and the

Nationstar stakeholders. Four suggested best practices may include ensuring loan terms are fully

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disclosed and competitive, offering customers enough information so they can make informed

decisions, ensuring every loan makes sense, and exercising due diligence determining the

customers are able to repay the loan (Wells Fargo, 2016). Nationstar recognizes that all

stakeholders do better when local communities and economies are strong and resilient

(Nationstar Mortgage, 2015). Therefore, investing in underserved communities, exploring ways

to expand customer access to quality and responsible mortgage products, services, and education

are important in the Nationstar ethical decision making process.

Addressing Nationstar’s Past Lawsuits and Minimizing Legal Risks

Nationstar must implement business decisions that address any potential lawsuits in

which they may be routinely and currently involved in (Nationstar Mortgage, 2015). These

lawsuits may range from a single party to class action lawsuits with multiple parties involved and

are generally due to alleged violations of consumer protections, securities, employment, contract,

tort, common law as well as many other laws that regulate the mortgage industry (Nationstar

Mortgage, 2015). Preserving Nationstar’s reputation will consist of effectively communicating

and building solid relationships with stakeholder (Brown, 2007). Minimizing reputational risk is

managed through strong corporate governance and setting a tone from the top. It may include

issuing timely and accurate financial reports, informational newsletters, and excellent customer

services to win the trust of stakeholders (Brown, 2007). Internally, Nationstar must maintain

timely communications, establish strong policies and procedures, instill ethics by enforcing a

code of conduct, comply with current laws and regulations, and respond promptly to oversight

professionals (Brown, 2007).

B. Culture: How Nationstar Business Decisions and Processes Impact

Sustainability and Elements of Corporate Culture

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Nationstar’s business decisions and processes must positively impact sustainability as

well as the elements of their corporate culture. The recent issues surrounding corporate culture

in the mortgage lending industry mainly addresses two concerns: restoring public trust and

enhancing financial stability in the housing market. This is due to a majority of the problems and

failures during the subprime lending crisis and economic downturn being rooted in poor cultural

foundations (Deloitte, 2016). As a result, culture in the mortgage industry places emphasis on

the organizations’ norms, attitudes, and behaviors related to risk awareness, risk taking and risk

management in the Nationstar culture (Thaker, 2016). Whereas, in the past the front line culture

had traditionally been less focused on risk management and more focused on business activities

that generate revenue and reduce expenses (Deloitte, 2016).

A sound cultural and ethical framework may help to reduce regulatory issues, fines and

litigation (Deloitte, 2016). In addition, an appropriate culture should not only consider legalities

but also the consistency of Nationstar values in ethical treatment of their customers and the

community. Nationstar CSR efforts should work with stakeholders in achieving a culture that

contributes to better economic, environment, and social performance. Consumers have a

tendency to distrust lenders, thus a commitment to CSR is one way of dealing with a lack of

trust. The improved trust driven by a commitment to CSR may also enhance the reputation and

brand value of Nationstar. Additional benefits arise though corporate citizenship and

engagement with communities, which can lead to innovations in new mortgage products and

production processes that generate new revenue or expand mortgage markets (Deloitte, 2016).

Over time, this can provide a significant competitive advantage for Nationstar.

Nevertheless, creating strong, sustainable communities with quality affordable housing

and affordable mortgage payments will provide a positive cultural framework that will help carry

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out Nationstar’s vision and mission. For one, it will play a critical role in helping U.S. families

keep their homes and stabilize neighborhoods, while ensuring that the underserved have access

to credit while managing risk (HUD, 2014). This will work to put Nationstar in a strong position

to minimize any losses from future market disruptions. Moreover, supporting the dream of

homeownership contributes to stable housing, thus provides an ideal platform in coordinating

access to credit, supporting community living, and preventing homelessness. Many of the

neighborhoods with the highest rates of foreclosure have been “racially isolated” within

neighborhoods with access to little economic opportunities, long commutes to jobs, and homes

that pose health risks and poor quality school systems (HUD, 2014). Therefore, it is critical to

promote a culture in which “place” influences outcomes, that supports policies related to

community development, transportation, climate change, energy efficiency, and disaster

readiness (HUD, 2014).

C. Stakeholders: How Nationstar Stakeholder Groups

Will be affected by Ethical Business Decisions and Processes

Nationstar stakeholder groups may have conflicting views on the Company’s ethical

business decisions and process. This is because the mortgage industry is very complex and

stakeholders will often debate over what constitutes doing good business. In addition, certain

rules and regulations impact the industry, consumers, and other external stakeholders in

numerous ways, leaving it difficult to always have a win-win outcome. In the past, most

stakeholders have generally agreed that some subprime loans may be good for the economy

because they fill a particular niche market in the lending industry (Delgadillo, Erickson, &

Piercy, 2008). However, when these loans become delinquent, stakeholders such as investors are

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mostly in favor of foreclosure over loss mitigation because non-performing assets are highly

expensive to service (Nationstar Mortgage, 2015).

On the contrary, subprime loans help provide financing for millions of homebuyers with

few credit options and some stakeholders believe this segment is critical to the economy

(Delgadillo, et.al.). Therefore, not all stakeholders will agree with what constitutes predatory

lending which will be a challenge for Nationstar make implementing some of these decisions

(Delgadillo, et.al.). For instance, loans with hidden prepayment penalties may be considered

predatory, however loans with higher interest rates do not always fit the definition (Delgadillo,

et.al, 2008). In addition, research has defined predatory lending as consumer loans with

potentially aggressive and deceptive marketing, that disregard a borrower’s ability to repay, with

high rates with excessive fees, and high prepayment penalties (Delgadillo, et.al, 2008). While

most consumer advocate groups tend to focus on victims of these practices, lenders are mostly

concerned about how predatory loans may influence profits (Delgadillo, et.al.2008). Therefore,

the differing viewpoints among stakeholders is a challenge for the mortgage industry.

Section V. Impact

A. Nationstar Mortgage Holdings, Inc.: Community

Evaluation of Business Ethics, Regulatory Issues and Best Practices in CSR

Nationstar ethical decisions and responses to regulatory issues are likely to have a

positive impact on the community and the general public. In recent years, mortgage servicers

have been under increasing pressure to make socially responsible and ethically sound decisions,

while also complying with industry regulations and generating sufficient profits (Kemper &

Martin, n.d). CSR strategies are helpful in this aspect as it may increase the likelihood that the

Company can improve profits while also creating positive outcomes for society (Kemper &

21


Martin, n.d). Therefore, some best practices that Nationstar should consider building on basic

strategies. First, Nationstar strategies must be viable in order to create an effective approach to

issues faced in society and the home mortgage environment (Kemper & Martin, n.d). Second,

Nationstar must meet their legal and regulatory commitments to government authorities,

investors, and other stakeholders (Kemper & Martin, n.d). Third, Nationstar must meet

expectations of the mortgage industry and the communities in which they operate (Kemper &

Martin, n.d). These general practices provide for a good foundation in maintaining the Nationstar

reputation as the leading mortgage servicer in the U.S.

Predatory Lending, Mortgage Fraud, and Its Impact on the Community

Protecting borrowers from predatory lending should have a positive impact on both the

community and the business of Nationstar. Consumer mortgage debt has a widespread impact

on the economy with at least three quarters of all American families having some sort of debt

(Wolff, 2015). The economic recession offers a clear example of how abusive lending practices

can not only impact the macro economy but also communities. Problems in subprime mortgage

lending had caused 12.5 million homes go into foreclosure between 2007 and 2012 (Wolff,

2015). This resulted in declines in home equity for many homeowners, including those who

owned their homes outright (Wolff, 2015). In addition, certain types of families and

communities such as minorities and the lower income, have seen higher concentrations of

abusive loans. For instance, African American and Hispanic borrowers with credit scores above

660 were three times more likely than white borrowers with the same credit score to receive a

high cost mortgage (Wolff, 2015).

Mortgage fraud can additionally have a serious adverse impact for consumers which may

lead to, higher interest rates, identity theft, compromised credit reports, high property taxes,

22


defaulted loans, and foreclosed properties (FBI, 2010). In addition, mortgage lenders are also

victims of mortgage fraud and lose millions of dollars every year due to fraud related issues

(FBI, 2010). Mortgage lenders are faced with either absorbing the loss by reducing earnings,

which ends up harming stockholders or charging customers higher fees to offset those losses

(FBI, 2010). Government insured loans may also fall victim and eventually end up being paid by

taxpayers (FBI, 2010).

Impact of Foreclosure Prevention on Nationstar, Borrowers, and Communities

Borrowers who lose their homes to foreclosure not only lose out on their existing home

equity, but also lose out on the opportunity to save money through affordable credit for several

years (Wolff, 2015). For instance, the prior economic recession had led to a high number of low-

income and minority neighborhoods, with about one-fourth of loans in low-income

neighborhoods and one-fifth of loans in minority neighborhoods, to either serious delinquency or

foreclosure (Wolff, 2015). The impact on foreclosure in these communities resulted in long-term

economic problems such as home equity loss from declined property value, increased crime, and

neighborhood deterioration (Wolff, 2015).

In addition, there were many issues with lenders of foreclosed properties failing to invest

in property maintenance and property upkeep in minority neighborhoods (Wolff, 2015). These

foreclosed properties are often locations of criminal activity, which can further bring down

property values, and increase costs while reducing revenues for local communities (OCC, 2007).

This can in turn impact stakeholders in the mortgage industry. For instance, foreclosures can

lessen the market value of securities thus impacting investors and insurers. As a result prevention

is an interest to all stakeholders because it is the best way to minimize credit losses, preserve

customer relationships, stabilize neighborhoods, and minimize the effects that vacant properties

23


have on crime and value (OCC, 2007). Lenders may also face negative publicity over rising

foreclosure rates and negative bank servicing ratings from rating agencies, which is also a

concern (OCC, 2007).

B. Global Environment: How Nationstar Business Ethics and Regulator Issues Impact

the Global Environment and Best Practices in CSR

To succeed as a global business, Nationstar must help strengthen the communities they

serve and address any challenges related to business ethics, regulatory issues, and CSR activities.

In the past, the effects of the global environment have been overlooked in the U.S. mortgage

industry since real estate has been historically viewed as a localized phenomenon (Bardhan &

Kroll, 2007). The industry itself is a conglomerate of U.S. companies dominating U.S. markets

and foreign companies in foreign markets, yet globalization has increased the extension of

business to international markets (Bardhan & Kroll, 2007). The shift is mainly due to changes in

technology and the internet, which has extended the mortgage business to a global clientele base.

Foreign investments and securitization of mortgages with different loan instruments has

expanded debt and real estate equity to global markets (Bardhan & Kroll, 2007). This has

allowed for foreign investors an opportunity to invest in U.S. financial assets which increased

portfolio diversifications and impacted risk returns (Bardhan & Kroll, 2007). As a result, more

consumers are now buying homes globally and there have been a growing number of foreign

nationals applying for mortgages in the U.S.

Furthermore, mortgage servicing companies have increasingly outsourced parts of their

servicing segments to offshore companies which has impacted the economy and real estate

market in those countries (Panchuk, 2013). These global factors have impacted Nationstar in a

number of ways. For instance, globalization influenced the U.S. job market and income since

24


offshoring jobs to lower wage countries has decreased incomes and jobs in the U.S. (Panchuk,

2013). In addition, globalization reduced income equality between developed and developing

countries, which increased income inequality in the U.S. As a result, Americans have had less

money to spend on housing hence making it difficult to achieve the goal of homeownership

(Panchuk, 2013).

Nationstar currently contracts with vendors whom have operations in India and the

Philippines. Nationstar also announced plans to grow their global operations in order to reduce

mortgage servicing costs in the U.S. (Nationstar Mortgage, 2015). Two key ethical issues with

this will include the ethics of working conditions and the ethics of low wages particularly with

the countries in which Nationstar does business. On a positive note, in countries like India and

the Philippines, income earned through foreign businesses has led to increased wealth, which has

an overall positive effect on social welfare, health, education, and society in general, and has

taken these countries out of poverty (Jones, 2014). However, the business leaders of Nationstar

should ensure proper ethical decisions and CSR best practices are made to prevent exploitation

of foreign workers.

In many foreign countries, it is common to engage in business practices that are illegal in

the U.S., as regulated under the Foreign Corrupt Practices Act of 1977 (FCPA), and this could

adversely impact business and Nationstar’s reputation (Nationwide Mortgage, 2015). Congress

had enacted the FCPA in 1977 in response to issues of widespread bribery of foreign officials by

U.S. businesses (DOJ & SEC, 2016). The act was passed to stop corrupt practices, create honest

companies, and restore integrity in the foreign marketplace. Corruption is a serious global issue

that can hinder economic growth by diverting public resources needed to better society, like

health and education, and can threaten international stability and security (DOJ & SEC, 2016).

25


Corruption also facilitates crime both within the U.S. and overseas, through terrorism, human

trafficking, weapons and drugs, and through supporting third party venders, borrowers, investors,

who are involved in such activity (DOJ & SEC, 2016). This can be very bad for the business of

Nationstar. Therefore, in order to compete in a global marketplace, an effective compliance

program will be a critical part of Nationstar when minimizing adverse impacts.

Section VI. Outcomes

A. Nationstar Mortgage Holdings, Inc.: Efforts

Cultural Awareness and Civic Engagement Activities

Nationstar engages in various cultural awareness and civic engagement efforts which

have positively influenced their business outcomes. Nationstar also recognizes that cultural

awareness is the foundation of communication with its employees, customers, and other

stakeholders. In today’s mortgage industry, demographics are changing from being

predominantly white male focused, to having more women and minorities being promoted into

well-deserved leadership and management roles (Baer, 2016). With employees originating from

a wide range of cultural backgrounds, establishing a shared workplace of norms and values

should be an ongoing priority (Baer, 2016).

Many financial institutions, mortgage servicers, and other firms serving the mortgage

industry have already been working toward implementing best practices of diversity and

inclusion. This includes Nationstar whose customer base is significantly diverse thus the

Company believes it is important for their employees to reflect diversity as well (Nationstar

Mortgage, 2016). Both Nationstar and other industry competitors have worked very hard in

recent years to make these improvements within the mortgage workforce. For instance, as a part

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of these initiatives, Nationstar began actively participating in The Five Star Institute which was

launched by the American Mortgage Diversity Council (AMDC) (Honea, 2016).

The AMDC is a member-based organization comprised of industry leaders and

advocates focused on diversity and inclusion in the mortgage industry (Honea, 2016). The goal

is to support and promote the industry’s best practices in cultural diversity as outlined under

Section 342 of the Dodd Frank Act, which calls for greater diversity in the mortgage workforce

(Honea, 2016). Therefore, Nationstar must bring together a talent pool that embraces culture as a

key component of effective and sustainable diversity and inclusion practices as a part of their

everyday business (Honea, 2016). In 2017, Nationstar must continue to attract diverse talent and

bring together employees from various, cultural, lifestyle, spiritual, ethnic and other groups.

Nationstar must also focus on including more minorities, women, the disabled, Veterans, gay-

lesbian, bisexual, and transgender owned businesses in all of their contracting activities (Fannie

Mae, 2011).

The Nationstar Artists-in-Residence Program

As a part of Nationstar’s cultural diversity and inclusion initiatives, the Company also

sponsors an Artists-in-Residence Program for employees at its North Texas headquarters

(Nationstar Mortgage, 2016). Throughout the year, the Artists-in-Residence Program brings in

three professional artists from diverse backgrounds for a 30 year period to present art on blank

walls within the Nationstar building. The themes are centered on an artist’s interpretation of

what a home means to them, which provides for a variety of interpretations from artists around

the world (Carlisle, 2015). Artists-in-residencies are known for being an effective program in

aiming at art from diverse groups while also providing the time and space for creative work of

artists from all backgrounds and disciplines (Carlisle, 2015).

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Nationstar and Civic Engagement Efforts

Nationstar is aware that giving back to the community on a corporate level is important

for the customers that they serve (About Nationstar, 2016). That is why the Company goes one

step further in incorporating civic engagement into their company culture. The outcome of civic

engagement and giving back to the community can also be a big boost for Nationstar’s business

and reputation with stakeholders. As a result, Nationstar reaches out to the community in several

different ways. For example, the Company regularly participates in Habitat for Humanity,

corporate giving, volunteerism, as well as implemented both the Random Acts of Kindness

Project and Community Outreach Team (About Nationstar, 2016).

Nationstar and Habitat for Humanity

A large part of Nationstar’s involvement in the community consists of working with

Habitat for Humanity. Habitat for Humanity is a non-profit organization founded in 1976 that

centered on individuals whom are in need of adequate and affordable housing (Habitat for

Humanity, 2016). The organization is involved in over 1,400 communities both across the U.S.

and globally in 70 countries, and helped 6.8 million people to achieve safe, decent, and

affordable shelter (About Habitat, 2016). Habitat for Humanity also partners with businesses in

local communities to help improve the quality of housing. Habitat homeowners often assist in the

process by building their own homes alongside volunteers as well as pay an affordable mortgage,

which is effective in stabilizing businesses while also giving back to the communities (About

Habitat, 2016). With Nationstar support, Habitat homeowners can achieve the “strength,

stability, and independence they need to build a better life for themselves and their families”

(About Habitat, 2016).

Nationstar Corporate Giving and Employee Volunteerism

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Nationstar routinely participates in corporate giving and volunteerism through company-

wide food and toy drives and various community involvement activities (About Nationstar,

2016). These activities allow for Nationstar and employees to give in-kind food or toy items,

make cash donations, or contribute volunteer services in connection with the drives. Since

Nationstar already partners with various organizations in the community, they may consider

enhancing these efforts by adding grant investments to nonprofit organizations that help

struggling homeowners (Fannie Mae, 2011). Giving back to the community is an effective way

for Nationstar to build relationships by making genuine connections with employees and

customers, then finding ways to contribute. This includes providing volunteers with resources,

programs, and recognition opportunities to encourage community involvement in causes that are

most important to them (Wells Fargo, 2016).

The Nationstar Random Acts of Kindness (RAK) Project

Nationstar implemented a Random Acts of Kindness Project (RAK) which randomly

selects customers in financial distress to offer free mortgage payments for twelve months

(Nationstar Mortgage, 2015). The concept of RAK originated in the 1980’s and is celebrated by

an unofficial holiday celebrated each year on February 17 (Wonderopolis, 2014). The

philosophy behind RAK is “altruism” which is the selfless concern for the welfare of other

people without expecting anything in return (Wonderopolis, 2014). The RAK Project has been

effective in showing kind gestures to Nationstar customers in communities across the U.S. The

RAK Project also encourages customers and employees to get out and pay forward and is

something Nationstar intends to continue in upcoming years. These projects further intend to use

technology and social media in building brand awareness while creating a “wow” factor

(Wonderopolis, 2014).

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The Nationstar Community Outreach Team

Nationstar founded the Community Outreach Team in 2013 in order to reach out to

distressed homeowners through a department infrastructure that partners with several

communities in order to build relationships (Nationstar Mortgage, 2014). The Community

Outreach Team is designed so that struggling families can walk into a local event and speak with

both Nationstar staff along with a local housing counselor in finding an affordable mortgage

payment solution. The objective of the program is for Nationstar to show commitment to the

communities in which their customers reside. To achieve this, Nationstar partners with

government, national, and local agencies to advocate and provide solutions to homeowners

(Nationstar Mortgage, 2014). The primary goal is to help as many families as possible to stay in

their homes, protect property values, and to build a stronger U.S. housing market (Nationstar

Mortgage, 2014).

Providing Affordable Housing and Preventing Homelessness

Nationstar is aware that despite their foreclosure prevention efforts, some foreclosures

cannot be avoided. That is why when foreclosure is the end result, Nationstar must take efforts

to rehabilitate and sell these properties as quickly as possible (Fannie Mae, 2011). One way to

accomplish this is through making prompt repairs to foreclosed properties so that they are more

attractive to homebuyers (Fannie Mae, 2011). The outcome of these efforts are to preserve

property values and promote neighborhood stabilization. Nationstar may also work directly with

real estate agents through its Xome platform in order to market these properties to consumers.

Xome makes available to the public, every Nationstar owned property available for sale

(Nationstar Mortgage, 2016). As an additional part of supporting affordable housing, Nationstar

may consider increasing financing projects that specifically target areas with shortages of low

30


income housing for families and the elderly (Fannie Mae, 2011). Nationstar may consider

supporting non-profit buyers who build such affordable housing under programs like the Section

8 federal rental subsidies (Fannie Mae, 2011). These non-profits are dedicated to providing

housing in low income families and to senior citizens who would otherwise become displaced or

homeless (Fannie Mae, 2011).

Nationstar Green Initiatives

Nationstar should engage in green initiatives in order to assist both single and multi-

family property owners seeking to reduce their utility costs, operate their homes more efficiently,

and reduce their impact on the environment (Fannie Mae, 2011). By focusing on green

initiatives, Nationstar would help to maintain quality and affordable housing through reducing

energy and water costs to homeowners. Working toward this goal may involve establishing a

green housing task force to bring together industry experts in providing information needed for

the strategy. Moreover, Nationstar may integrate energy efficient metrics in underwriting green

loan products. By investing these, Nationstar is helping to keep housing affordable while

improving the quality of the properties available for sale (Fannie Mae, 2011).

B. Alignment: How Nationstar Efforts Align to the Corporate Mission, Vision, and Values

Cultural diversity and civic engagement efforts are central to the Nationstar mission of

providing a quality customer experience with its mortgage lending and servicing operations

(Nationstar Mortgage, 2015). As an essential part of the customer experience, Nationstar

recognizes that culture and empowering employees to become active in the community is

significant in aligning to their corporate mission, vision, and values. These efforts align to create

partnerships that help build communities for the customers which Nationstar serves. Creating a

diverse and inclusive workforce will additionally leverage the dedication needed from Nationstar

31


employees in order to achieve superior business results. Nationstar intends to attract, develop,

and retain the best talent from all walks of life and backgrounds (About Nationstar, 2016). This

requires for the Company to facilitate a culture of inclusion where all employees feel respected,

are treated fairly, are provided a work-life balance, and have an opportunity to advance in their

careers (About Nationstar, 2016).

Nationstar is committed to keeping the dream of homeownership alive thus partnering

with both government and non-profit organizations, aligns with helping people to stay in their

homes to minimize the effects that foreclosures have on people and the community (Nationstar

Mortgage, 2015). It’s better for the customer and the business of Nationstar to find ways to

modify troubled loans in order to prevent foreclosures (Our Commitment, 2016). This is why

Nationstar aims to be a helpful resource and building a track record of even small improvements

can lead to big impacts on customers and other stakeholders (Our Commitment, 2016).

Nationstar’s mission is an important asset in improving organizational performance and profits

which will align their brand and culture with a purpose (Groscurth, 2014). To instill the purpose

of Nationstar, managers must be accountable for addressing employee and customer needs. This

leads to greater focus on aligning mission, culture, and brand to empowerment of employee

engagement as a key driver of performance and business success (Groscurth, 2014).

C. Impact: How Alignment of Cultural Awareness and Civic Engagement Efforts

With Corporate Mission, Vision, and Values Will Improve

Nationstar Corporate Exposure and Profits

Impact of Nationstar Cultural Awareness and the Artists-In-Residence Program

Nationstar efforts made toward cultural awareness with both employees and customer

will have a positive impact on people and profits. The Artists-in-Residence Programs in

32


particular is a form of corporate exposure that specifically aligns with both Nationstar business

interests and having a positive social impact. Nationstar employees want to live and work in a

vibrant environment and community. Therefore, art programs can retain the employees needed

to build market share, brand, as well as reach out in engaging ways. The arts can additionally

create an environment that impacts background, ethnicities, and cultures, which are effective in

showing employee appreciation (Stearn, 2013).

Corporations and arts programs achieve impact in key areas such as social change,

storytelling, and employee engagement. Art programs contribute to positive social change such

as increased awareness and understanding, change in attitudes, increased civic participation, and

policy change (Stearn, 2013). Nationstar support for arts endeavors will also tell the story of the

“underrepresented” such as the homeless and victims of foreclosure to help make a powerful

difference (Stearn, 2013). This creates visual presentations that help corporations tell their own

story of CSR in specific ways. Furthermore, art programs in cultural diversity helps corporations

in development of healthy work communities to attract and retain employees, while fostering

cross-cultural understanding in today’s diverse workforce (Stearn, 2013).

Impact of Nationstar Contributions to Habitat for Humanity

Nationstar contributions to Habitat for Humanity positively impacts the need for safe,

quality, and affordable housing. Families in need of affordable housing exist across both the U.S.

and the world, from small towns, villages, and cities, to local communities (Impact, 2016).

Unstable and inadequate housing impacts nearly half of all Americans within their lifetime, and

more than half of all adults have to take a second job, cut back on health care and food, and

move to unsafe neighborhoods in order to pay their rent or mortgage (Impact, 2016). Housing

instability also leads to unstable communities due to frequent moves, overcrowding, evictions,

33


and foreclosures, while also creating stress and depression for many families (Impact, 2016).

Therefore, Habitat for Humanity combats these challenges by providing opportunities and self-

reliance to individuals. An affordable mortgage also provides homeowners with a better chance

to save and invest in retirement and education (Impact, 2016). By partnering with Nationstar,

families become empowered and are able to acquire access, skills, and the financial education

needed to be successful homeowners (Impact, 2016).

Impact of Nationstar Corporate Giving and Employee Volunteerism

Corporate giving and volunteerism of Nationstar employees may not only have a positive

impact on the community, but may also distinguish the business from competitors which will

lead to loyal customers and happier employees. In a study conducted by Cone Research, it was

found that roughly 82 percent of U.S. consumers consider CSR activities when deciding to

purchase products or services from a company (Lavine, 2016). Corporate giving can also

empower millions of Americans by promoting happy, healthy, and productive lives which

enables them to become productive contributors to the future of society and the economy.

Providing employees with an avenue to give back builds morale and creates collaborative

inspired teams so that they love what they are doing and do a better job (Lavine, 20160).

Volunteering also provides leadership opportunities for Nationstar employees, which leads to

improved staff performance and increased productivity and sales. Caring for and helping

communities has a positive impact of the culture of Nationstar and ultimately provide a

tremendous support within communities (About Nationstar, 2016).

Impact of Random Acts of Kindness (RAK) Programs on CSR

Since the economic recession, businesses have become increasingly committed to

altering their practices in order to remain profitable and retain their employees (Agudelo, 2015).

34


As a result, there have been a growing number of businesses engaged in doing random nice

things for their customers to make a difference in their lives. These acts of kindness have helped

to improve brand loyalty while leading to a profitable impact on products and services. In

addition, RAKs have become an effective method of doing more for customers, which often

results in positive social media and public relations (PR), increased loyalty, and financial

benefits to the company’s bottom line results (Agudelo, 2015).

Impact of Nationstar Community Outreach Team

The Nationstar Community Outreach Team impacts profits by preserving homes and

improving relationships with customers through homeowner education, in-person and telephone

contact, as well as direct mail to inform their homeowners of alternatives to foreclosure

(Nationstar Mortgage, 2016). Over the last year, Nationstar helped more than 65,000 customers

stay in their homes as a result (Nationstar, 2016). Nationstar also participated in 50 community

events in order to meet face-to-face with more than 700 customers who needed assistance

(Nationstar, 2016). This has allowed for over 39,000 customers to transition from delinquency

to being current on their mortgages (Nationstar, 2016). Therefore, the outcome of outreach

efforts have brought stability to the housing market while minimizing the negative impact of

foreclosure on families and communities (Fannie Mae, 2011).

Nationstar’s Community Outreach Team and Foreclosure Prevention

Nationstar’s goal in foreclosure prevention is to help customers stay in their homes, by

modifying troubled loans and doing whatever possible to avoid foreclosure. Nationstar

participates in community outreach by offering workshops to meet homeowners face to face to

address specific needs (Nationstar Mortgage, 2015). The Company participated in 50

community events to assist more than 700 customers who need help (Nationstar Mortgage,

35


2015). Helping customers to stay current on their loan payments is a win-win for everyone. In

2015, Nationstar partnered with several government and non-profit organizations to help find

solutions in keeping customers in their homes. In 2015, Nationstar helped more than 65,000

customers stay in their homes and avoid foreclosure through government modifications and

HARP refinances (Nationstar Mortgage, 2015).

Impact of Homelessness Programs, Affordable Housing, and Green Initiatives

Helping the homeless is a public awareness effort that impacts the community through

contributing funds that support working in prevention of homelessness throughout the U.S.

(Fannie Mae, 2011). Nationstar’s initiative also encourages employee volunteerism in serving

the homeless and people at risk of becoming homeless (Fannie Mae, 2011). Nationstar may

positively impact the homeless in communities by supporting service providers that offer

permanent affordable housing, transitional housing, prevention, social services, and emergency

shelters to selected agencies (Fannie Mae, 2011). In addition, housing recovery programs as a

part of the initiative can impact affordability by leading to energy efficient and cost effective

housing (HUD Exchange, 2014). This can aid in providing relief and opportunities to

communities still attempting to recover from the economic recession. Lastly, purchasing and re-

developing foreclosed and abandoned homes will have a significant impact in Nationstar profits

by creating affordable housing and prevention of homelessness (HUD Exchange, 2014).

Section VII. Conclusion

Nationstar Mortgage Holdings, Inc. (NYSE: NSM), is a leading U.S. mortgage servicer

that earns fees through the delivery of quality loan servicing, originations, and transaction based

services to over 2.7 million customers (Nationstar Mortgage, 2016). In light of the foregoing

research, it appears that Nationstar may benefit from further strengthening and improvement of

36


their current CSR activities, as well as make available to the public an annual published report

advising stakeholders on their CSR progress. Corporate social responsibility (CSR) is an

important form of self-regulation in today’s business models that ensures active compliance with

laws, regulations, and ethical standards (Prathima, 2015). Implementation of CSR must go

beyond the minimum requirements to meet compliance to engage in actions that further social

good as a priority with the interests of the firm being secondary (Prathima, 2015). CSR also

aims to provide a positive impact on the environment and stakeholders such as customers,

employees, investors, communities, and others (Prathima, 2015). Therefore, the outcome of a

CSR program would provide both intrinsic and extrinsic rewards to Nationstar and their

stakeholders.

Intrinsic Rewards

The intrinsic rewards of implementing CSR activities will ultimately result in customer

and employee appreciation, which can help Nationstar create long-term and enduring

relationships by discovering their needs and delivering the most beneficial services, products,

and guidance. Using this approach along with Nationstar’s broad level of mortgage expertise

enables profitability while also providing quality services to customers. Organizations that

attempt to keep their employees motivated are likely to increase performance of employees

which leads to overall success for both the business and the employees (Khan, Latif, Jalal,

Anjum, & Rizwan, 2014). Improving workplace culture and employee retention will be critical

in support of these upcoming trends. Nationstar will need to attract and retain the best workforce

by proving they are committed to purpose and social good (Russell, 2016). A company’s culture

has a significant effect on ethical behavior of employees, and a poor culture can cause many

problems from illegal activity to high rates of turnover (Mack, 2016). Strengthening CSR in

37


the workplace would be effective in counteracting this as it would encourage employees to put

more efforts into Company values, which would boost work morale (Russell, 2016). Expanding

employee volunteerism will also drive Nationstar to expand their impact in addressing social

issues and the needs of the community.

Extrinsic Rewards

Nationstar should also consider the extrinsic rewards that CSR activities will provide in

local communities and partnerships that will additionally motivate employees for commitment to

the organization. Extrinsic rewards may lead to motivation of the employees and greater service

value to customers which would benefit both the Nationstar stakeholders and community

(Noked, 2011). Philanthropy and business practices in CSR activities are two common sources

of extrinsic value since they involve ethical benefits of helping others in need while serving as a

means of improving the Company’s reputation in the public (Noked, 2011). For instance,

Nationstar participation in community foreclosure prevention events homeowners led to positive

recognition by Fannie Mae and was ranked number one in preventing delinquencies and

foreclosures. Nationstar should also continuously encourage employees to give back to the

community and develop programs that promote a culture of caring. Incorporating these CSR

activities would support ethical business and can greatly enhance Nationstar stakeholder value.

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